DeGiro and Euronext hunting for big fish
Breaking news. Yesterday‘s move by Euronext of introducing a fee cap for AEX index options turns out to be a joint operation with DeGiro. Today the discount broker will announce a new fee schedule for AEX index options. Euronext and DeGiro are going for the big fish. The heavy retail traders in index options.
€0,20 per option, but €995 monthly charge
The deal is straightforward. Pay a monthly charge of €995 and the fee for AEX index options wil be set at €0.20 per contract. The regular fee, without a special deal, at DeGiro is €0.85 per contract. This means clients who trade in excess of 1500 contracts per month will be interested.
To put things in perspective. Uncapped exchange fees for options at Euronext are 31 cents. At TOM the exchange fee is 20 cents per contract. Add clearing fees, broker fees.. this deal is aggressive.
A few very big fish
There are a very few retail investors trading this kind of volumes. However, this small group has an estimated combined market share of almost 50% in AEX options. Convince them to move to DeGiro (and Euronext) and the AEX option market volumes will move back to Euronext.
Arcade shops in danger zone
Not only extremely large retail traders may be interested. Folks at Dutch arcade shops like Better Options and Gets are currently paying a lot more per contract. They pay at least the full uncapped exchange fees (31 cent), the clearing fees (say 10 cent) and a surcharge. They may not be able to beat DeGiro’s offer.
Tax friendly
There’s an extra argument to be made to trade with a retail broker like DeGiro (or Binck, Lynx for that matter). Tax authorities in The Netherlands usually see profits with retail brokers as a tax free profit from retail investing.
However, when you’re trading full time at a place like Better Options or Gets the profits can possibly be classified as profit from your daily job. With all consequences for the taxes. The tax man is reconsidering the situation with profits from daytrading.
Binck always used to have a few clients trading massive size in index options – for exactly this reason.
Well played
This DeGiro index deal will start per July 1st. At the same time the option combinations at DeGiro will finally be introduced. I’ve learned there’s an API available too, and guess some tailor made deals will be possible to arrange.
Finally Euronext is getting aggressive in defending their market share against TOM. Lowering the regular fees wouldn’t help much. TOM has locked-in most of the retail flow from Binck, Alex and ABN AMRO.
Aiming for the largest retail traders is a smart decision. Well played.
Looks like the system Van der Molen had with Online trader.
As market maker I pay 10-14 cent per contract.
5 to the exchange and 5-10 to clearing house.
This deal of 20 cent per contract is sharp – as you don’t have to provide liquidity with quotes (I do)
As is so often the case, DeGiro’s numbers don’t add up. They already claim to execute more than 130.000 contracts per month which would give them a *market share* of more than 20% in the AEX options, as Jack correctly observed. This could only be true if Degiro already execute a significant part of the large *retail* clients’ business, the kind of people who presently trade via Binck and thus cause TOM to have such a large market share in the AEX. The simple fact that Binck’s financial data (number of executed trades and market share) hasn’t hinted at any significant drop in turnover on their side since the arrival of DeGiro, as well as the fact that none of the Dutch brokers have shown any pressure to lower their fees in order to bridge the gap with DeGiro’s fees, is enough evidence that DeGiro’s market share is way smaller than what they claim.
http://fd.nl/beurs/1106218/strijd-om-optiebelegger-komt-los
@ 5.33 pm
it’s 20 cents PLUS € 995 per month. for example for 5.000 contracts per month that translates to 40 cents per contract. not that many people i know who trade such size for their private account.
Du pain, du vin, du Giro
Bread, wine, Giro
what’s the joke?
@JUNE 4, 2015 AT 9:31 AM
Sharp. If these large retail traders are 50% of the market, and DeGiro is trying to convince them to switch to DeGiro..
On the other hand, 130.000 contracts are 20% of the remaining market volume at Euronext. But only 10% of the combined Euronext-TOM volume in AEX options.